UPDATE 3-Puerto Rico looks to borrow amid financial turbulence

Feb 11 (Reuters) - Puerto Rico said on Tuesday it plans to
issue general obligation bonds to refinance debt and ease its
liquidity crunch, but the island did not offer details as to the
timing or how much debt it plans to sell.

The U.S. territory, which has $70 billion in tax-free debt
outstanding, is mired in a multi-year recession. It has been
downgraded to junk status by all three major U.S. credit rating
agencies in the last week and is struggling to avoid default.

"We have completed significant measures in the past month to
improve our fiscal health and are ready to access the market
with a new issuance of GO bonds," David Chafey, chairman of
Government Development Bank for Puerto Rico, said in a
statement.

The statement did not specify when Puerto Rico would sell
bonds or how much it planned on selling. Barclays, RBC Capital
Markets and Morgan Stanley have been named as lead underwriters.
The issue would be the first time since August the territory has
tapped the municipal market.

A source familiar with the deal said Puerto Rico needs to
raise about $2.3 billion, which would allow it to refinance some
variable-rate bonds, a $290 million outstanding GO bond, and
more than $1 billion in debt service restructuring, as well as
borrow $100 million in new money. Hedge funds are expected to
show the biggest interest in the deal.

Puerto Rico Governor Alejandro Garcia Padilla said on Monday
that he had asked the legislature for approval to borrow up to
$3.5 billion in general obligation bonds.

A spokesperson for the territory said specifics of the sale
would be announced during its quarterly webcast, which was
rescheduled to Feb. 18 from this Wednesday - an indication that
the sale will take place toward the end of the month.
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